Where should you set up an Asian HQ?





Surveys suggest that the top four criteria businesses use in deciding the attractiveness of a location for Regional Headquarters are economic policies, domestic market size, infrastructure and political stability.

It seems like most Asian jurisdictions compete, at least on paper, to encourage companies to set up a regional headquarters within their borders.  Which is best?  There is no one size fits all and it really depends on your business model.  Anyone who says otherwise probably is not being objective. 

Traditional wisdom was that Hong Kong is the best bet if your focus is China and especially if you run a manufacturing company.  Singapore is best if your focus is South East Asia in general.  I used “traditional” deliberately because things are changing. 

On one hand, Hong Kong is arguably still Asia’s financial center.  But as Hong Kong marches towards 2047, politically, the future remains uncertain.  In addition, there’s an ongoing shift in economic activity to Shanghai and Shenzhen.

On the other hand, Singapore offers a slower pace therefore better quality of life and political stability.   But it is experiencing an economic slowdown, high living costs, high-cost of doing business and work permit restrictions.  So for many, Malaysia is seen as a viable alternative to Singapore.

Most regional headquarter programs involve tax incentives at the corporate and/or individual level.  I’ve found that without a doubt, Singapore is the easiest jurisdiction for English speaking Westerners to do business.  Indonesia and the Philippines have a formidable bureaucracy not to mention “negative lists”.  Malaysia is not SME friendly as it requires minimum paid up capital of RM500k or US$120k upwards for a 100% foreign owned entity, it has a headline corporate tax rate of 18%-24% and individual tax rates of up to 28%.  This compares poorly to Singapore’s 17% corporate tax rate and 17%-20% individual tax rate.  So despite the higher operating cost of Singapore businesses, depending on your business model, it is still an attractive jurisdiction especially given the strong talent pool and first world infrastructure.  Also noteworthy is that Singapore based regional headquarters with international intellectual property (IP) holding may claim a writing-down allowance (WDA) for the cost of acquisition of the IP. 

But before you invest, it is worth while meeting with a consultant with both Western and Asian experience to determine the right regional structure.  If your company is American, it is even more important to have a team that is both US and Asian qualified.

   

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